In recent years, the government has been taking measures to attract large funds to the business. One of the promising options is corporate bonds in Russia. The president of the country himself spoke in their favor, proposing to exclude the coupon tax on such securities. This is aimed at increasing interest from potential investors to invest in various enterprises.
Why and why?
Over the past few years, investment from abroad has been greatly reduced in volume. No wonder: the abundance of sanctions both on our part and in the opposite direction limits the possibility of doing business and investing in business. Nevertheless, there are many ideas; enterprises can grow and develop if they manage to find new reserves. It was decided that such an undeveloped storehouse could turn out to be a simple Russian people with certain reserves. If people don’t carry their money to banks, but instead start buying up corporate bonds and stocks, the problem will be partially solved.
According to current tax practice, personal income tax is charged on coupon income. Government officials believe that if this measure is canceled, citizens will prefer corporate bond income to interest in banking institutions, since the measure is much more effective and promising. On the other hand, it is also important that few of our fellow citizens imagine the work of the stock exchange, can focus on it. For example, what types of corporate bonds are there? Does the average person know about this? For the most part, people are sure that this is a "scam for suckers." Improving financial literacy is the only reliable way to attract public attention to investing in enterprises. When this situation changes, the corporate bond market in Russia will go up.
And what does it mean?
It is completely logical that people who are not oriented in financial instruments are afraid to invest in this. Again, few people have free money to risk taking over the market. Of course, you can believe that the yield on corporate bonds is high, invest the last money in it, but you should imagine the prospect of remaining “without pants”, as any desire passes, and you want to try something more familiar, safe.
To rectify the situation, it is necessary to explain to the general public how the issue of corporate bonds works, how the profit is secured, what risks there are and how to cope with the situation. The development of a culture of investment will help domestic entrepreneurship. The key skill is the ability to identify a project worthy of investing in it. Then the yield on corporate bonds will be positive. Well, if the decision is wrong, there is a risk of losing everything that is invested, but not getting anything in return - except for negative experience.
General theory
So, what are corporate securities, bonds? In fact, they can be equated to debt receipts. When an investor invests in a project, he provides them to the entrepreneur for use, just like a bank gives money to a creditor for a specific purpose. A businessman uses finances to purchase equipment, invest in productive projects, any other goals that may bring him income, and the investor receives interest similar to the interest paid by creditors. The interest rate is negotiated at the stage of the transaction.
As follows from the above, if the entrepreneur manages the received money wisely, he remains in profit, and the investor makes a good profit. Accordingly, if a businessman turned out to be inept (or simply fell victim to circumstances), then both parties are the losers - both the lender and the borrower.
What to count on?
The purchase of securities is the provision of money to the enterprise, which in the future should return to the investor with an increase, which is interest on corporate bonds. As a guarantor for the obligations of the enterprise are the assets of the company, including property. If the bond is not paid, there is no protection. This will be sold only if it was released by a reliable large company with a good reputation. Otherwise, the risks are too high to interest investors.
Typically, companies seeking to cover debts or receive additional money to existing financing enter the corporate bond market. This type of securities is very different from stocks, because control does not pass into the hands of those who make the purchase. In the most positive scenario, the investor, through corporate bonds, has an income regardless of what the financial results of the organization are.
By coupons: believe it or not
Coupon corporate bonds are presented in two versions: short-term discount and long-term. The first option assumes that the price is relatively understated relative to the nominal, and their validity period is no more than two years. When this period comes to an end, the price of paper rises. Now for the second option. Long-term bonds provide for the payment of income to investors. At the conclusion of the contract, they discuss with what frequency interest will be paid. Typically, the calculation period takes a month, quarter, year.
The last option is coupon income. It was he who was discussed a few years ago, when the president came up with the initiative to abolish income tax. In the current conditions, the purchase of long-term coupon securities in the corporate bond market involves making a profit at a floating or fixed rate. In some cases, the contract involves pegging to short-term bonds. If a potential partner is poorly guided in the global economy, does not have special skills in correctly forecasting the situation, it is better to trust corporate bonds of a fixed rate.
We buy: what and how?
To become a participant in the corporate bond market, you have to get comfortable on the stock exchange. A separate section has been allocated for these papers. Initially, the sale occurs on the following conditions: there is no commission for the investor, this concern rests with the issuer, and trading takes place through a broker. According to the classical scheme, an investment account is opened first, on the basis of which a tax deduction can be made.
If the investor pays personal income tax on the received income, if the amount of transfers reaches 100 thousand rubles per year, you can expect a return of 13%. Consequently, the annual return of 13% is already ensured only by a tax deduction. But, besides him, the investor is provided with profit by the profitability of securities!
Benefit: is it?
Perhaps, to the average man all this seems too rosy - so much so that one cannot believe it. Involuntarily you suspect a trick. Nevertheless, practice shows: corporate bonds are generally more profitable than deposits in a bank. True, if money is invested in those firms whose reputation has been tested for decades, the difference is almost imperceptible. These are not very profitable, but reliable options include:
- Sberbank
- Rosneft.
- RUSSIAN RAILWAYS.
What to look for?
When choosing securities, you need to analyze the option you are interested in:
- price;
- the size;
- Duration
- interest payment period.
As a rule, the exchange provides information on all of these items.At least, if the investor works on the Moscow Exchange, there all the information can be found without difficulty.
There is also a secondary securities market. For such corporate bonds, exchange instruments can calculate the average interest yield. You can find out real income, taking into account not only profitability, but also inflation, the amount that the broker takes for his services, the deduction of personal income tax, if any.
Let's count on an example
Perhaps, the consideration of the issue on the example of real firms is the easiest way to delve into this whole kitchen. As starting conditions, we establish that it was decided to invest 100 thousand rubles in a certain company by purchasing corporate bonds. Under the agreement, 14% of annual income paid at a time is supposed. The broker charges 0.2% of the turnover, but for one month the amount should be at least 180 rubles.
The tax deduction for these conditions is 13 thousand rubles, the coupon income is 14 thousand.
Losses: tax - 1 820 rubles, broker's commission accompanying the start of the transaction - 0.2% of 100 thousand, that is 200 rubles, commission for the next period - 1 980 rubles.
What will happen in a year? Add up the initial investment, all the profits and all the losses on the deal. The result is 123 thousand rubles. This means that the actual yield is 23% per year, that is, 23 thousand in just 12 months. And this is much more than any bank can offer.
However, there remains one slippery moment - inflation. Suppose for a billing year the figure was 15%. Her efforts from 123 thousand are only 104 550 rubles.
Corporate bonds: the beast in many guises
Corporate bonds are different. There are mortgage, convertible, there are no coupons, no collateral. It has already been indicated above that they come with a fixed, variable rate in percent.
The term “junk” bonds is quite widely used. Officially, these securities are not singled out in a separate form, but in fact, market experts will recognize them right away: with a small credit rating, projects are assessed as risky. Usually their credit rating is BBB or VAA, or even less. Such tools are considered low-quality, close to default. There are even such junk bonds that do not have a credit rating at all. The only way to attract an investor for such a project is to set a very high percentage of income. However, even this measure will not help attract market-savvy professionals because of the high level of risk.
Exchange bonds
Some experts distinguish this type of securities in a separate category, while others consider them a subspecies of corporate securities. Securities of the issue type are called so. They provide access to a simpler emission option. Such an instrument provides an inflow of financing mainly due to the fact that it is designed for a wide range of potential investors.
A distinctive feature of this type of securities is that there is no time limit for the performance of an obligation. The issue of these securities is not regulated by registration with the Central Bank; instead, the exchange itself is engaged in the event. She gives the papers a unique number and decides whether to admit bonds to trading. The main document on which the exchange specialists rely is the listing rules introduced on the resource.
How it works?
A subscription is opened on the exchange, bonds are placed through it. This means that everyone has access to them, which, in turn, guarantees liquidity. The contents of the bond prospectus can be varied, the requirements for this are less stringent than in the case of classic securities.
When a decision is made on the issue of exchange-traded bonds, at the same time, an extreme time limit is assigned - it is necessary to complete the placement by it. This usually happens earlier than a month from the moment the placement began. But for the issuer there are no time limits.Bonds can be traded not only on the exchange market, but also outside it.
Issuer: there are rules
Not everyone can become an issuer, but only one who satisfies the requirements established by the legislation of our country. The conditions are as follows:
- the issuer's life is 3 years or more;
- bookkeeping is organized according to the rules, approved for two years, has confirmation in the form of an audit report;
- the issue of bonds implies the presence of a physical carrier with an indication of the bearer, documents are stored centrally;
- face value, interest is paid in banknotes;
- for bonds, you can get the right to money, but only to interest and the nominal price of the paper;
- bonds participate in official exchange trading as part of an open subscription.
If stock bonds have already been placed, in addition to them, another issue can be made.
Microfinance: Bonds
MFIs (microfinance organizations) work based on the law adopted in 2010. It follows that an MFI can become a fund or other legal entity, but not a budget one. At the state level, there is a register of MFIs. Only after the company is included in this list can legal activity begin.
Updating the legislation in 2014 made certain changes to the features of the work of MFIs. In particular, emission requirements have changed. Currently, it is allowed to issue bonds in the face value of less than 1.5 million, but their purchase is available to investors with qualifications confirmed by documents. As for bonds for which the face value is more than one and a half million, anyone can buy them. The Bank of Russia holds MFIs under special control; this also applies to the issue of corporate bonds.
MFIs do not have the right to issue corporate bonds in excess of 10% of assets. As an exception, funds working with investors whose qualifications are officially confirmed.
If some organization is not included in the list of MFIs, it does not have the right to use the corresponding abbreviation and its decoding in the name. An exception is legal entities that are created for microfinance and are in the process of obtaining legal status.
To summarize
Corporate bonds allow you to earn income, but you should not rely on profits earlier than a year after the start of cooperation. There are short-term investment programs, but it is mainly annual that are represented on stock exchanges. Corporate bonds are more risky than government bonds, but profits can bring a big profit - as we saw above, 23% is a very real indicator. Of course, part of the amount is consumed by inflation.
Nevertheless, the result is more than positive. But we must take into account the probability of default, which will reduce the profit of investing to zero and will cause loss of invested funds. In order not to be in such a situation, you need to be able to choose the right projects that are reasonable to invest in, dismissing too risky and insecure proposals.